The 52-year-old is said to have beat Roberto Di Matteo in the battle to be manager of the League Cup winners, who were relegated from the Premier League on the final day of the season.
According to the club's official website, acting chairman Peter Pannu felt that Hughton was the perfect fit for the job and was impressed by the coach’s vision and theories, in particular his thoughts on developing youth talent and playing attractive football.
London-born Hughton began his coaching career with spells at Tottenham, where he spent 13 years as a player, before being approached by Newcastle United in 2008.
Hughton spent his first year at Newcastle as their first-team coach before being promoted to manager in October of 2009. However, despite guiding the Magpies to promotion and a comfortable position in the top flight he was controversially sacked 14 months later.